Have you taken a peek at the treasury market today? The curve looks like it ha having a parallel shift so that it will still be flat when the Fed raises rates next week.
This is some very efficient trading. I am still trying to figure what it means. Will the curve stay flat no matter what, which I think means the Fed keeps going because rates are not at a point that discourages real estate speculation? The dilemma there is that a flat curve usually implies an expectation of slowing growth. Higher rates as growth slows is not ideal.
Another idea I expressed several months ago was that the reissuing of the 30-year bond (just a couple of weeks away now) should put upward pressure on ten year yields. If that is what is playing out the fed should stop at 4.25% because the dynamics of the market would be solving the housing issue that the Fed has been concerned about.
Proud Member Of
Random Roger
© 2009 | Gadget Theme Blogger Template
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
4 comments:
Could it be that long rates are up because the dollar is taking a hit recently? The conundrum continues...
I would go the other way with that. Higher rates usually help strengthen a currency.
So we're on opposing sides of cause, but I agree with your estimate that the Fed is not done at 4.5%, but I never thought they'd stop there anyway.
When the Fed raises on the Jan 31 meeting it will invert the curve. Then the Fed will stop raising after they see they went to far like they always do, but guess what, it will be too late the damage will be done. Greenspan and his cohorts created the real estate economy by lowering rates to historic lows and now they will slow the economy raising rates to fast. This is the history of Greenspan's behavior and I see no reason why this time will be any different. Think about this, every time I talk to someone about what I think will be some major pain in the housing sector, and I express why this will not be good for the U.S. economy, they all think I am nuts and tell me real estate will never go down. Well I guess some people don't understand (imho) the history of markets and what happens once massive amounts of speculators enter any market. Maybe I am wrong, only time will tell.
Post a Comment